Chapter 3 Article

Article: Canadian Government Encourages CRTC to Ease VoIP Regulation

“Canada’s federal government has made a move to ease telecom regulation, by asking the CRTC to reconsider a decision made last year to control the pricing of VoIP telephone services.”


In May 2005, new regulations were set on Canada’s largest telephone companies. They were no longer allowed to set their own prices when launching IP-based communication services, leaving room for new competitors to enter the market. Shaw was one of these companies. However, instead of aiding the market, the regulation enabled Shaw to take advantage of the situation, and charge higher-than-average prices for their services, which they did. Canada’s Industry Minister, Maxime Bernier, is now stating that “After careful study … and the subsequent appeals, the government believes it is in the public interest for the CRTC to reconsider its decision”. She also stated: “In order to encourage innovation and productivity, it is imperative that regulatory measures interfere as little as possible with competitive market forces”. Though there is good reason to re-evaluate the newly set regulations, many also think that it has something to do with our recently elected conservative government, in attempt to create a better free market competitive environment in the industry.


Relation to Chapter 3

This article shows the importance of government regulation in a country’s market. In the article, the government made the wrong decision to regulate the prices on Canada’s largest telephone companies in effort to promote competition. This caused other companies to take advantage, and raise their prices. The regulation backfired, showing a flaw in the public system. In the textbook, the lack of competition is described as a market imperfection, but in the case of this situation, it is more efficient to have a single supplier rather than competition. On pg. 87 of the textbook, it states: “Despite the advantages of competition, it may be more efficient in some industries to have a single supplier of the product or service.” The example given was that of competing telephone companies in the same town. The situation in the article illustrates what could happen if the industry was wrongly regulated. It is arguable that telecommunications is part of a natural monopoly, and that it is better to have one company controlling the whole market, rather than several competing companies. Something else it shows, is that the party elected into the government, has significant effects on the market. Since the conservatives were voted into power, they are making changes to establish a more fair state of competition in the industry.